Archives for December 2018

I was reading a post over at Author Thomas J Stanley's blog of “Stop Acting Rich” fame. He was talking about how the mindsets are so different for people who merely act rich – and those who truly do have a high net worth.

Those who have a “millionaire mindset” are far more often to be found at discounters and and chains like Target and Wal-Mart, only buying things that they truly need or value.

Those who want to play the part of “being rich” are more often found at high end stores, spending money that they don't have so that they can play the part of being affluent.

Shopping For Bargains Until You're Broke

Those who act rich will often justify their high spending by talking about how much money they're saving, and by talking about all the “bargains” that they've gotten.

The problem is, they find so many of these so called bargains that they're spending more than they make.

Stanley talks about one such couple.

In spite of Dave and Linda's high income, they are two paychecks away from insolvency. How can this be possible? Perhaps it has something to do with Linda's collection of nearly 200 pairs of shoes all purchased on sale from a variety of upscale retailers. She insists that she saved thousands and thousands of dollars by buying these sale-priced items. Her husband is also a clothes horse. He has a closet full of suits all purchased at fall sales, winter sales, spring sales. . . . Many people who are Income Statement affluent like this couple are bargain shopping commandos. They are saving themselves so much money on purchases that they are nearly bankrupt!

It not only requires money to take advantage of all these “bargains” it takes time to plan and shop for these super discounts. Last year this couple purchased apparel from more than 30 different sources. Admittedly some of these purchases were made online, but in most cases Dave and/or Linda made a personal visit. They are relentless in searching for new purchasing opportunities.

Contrast this couple's shopping orientation with the millionaire next door types profiled in Stop Acting Rich (see pages 18 and 19). During the year in which they first became millionaires they had 2.45 times [median] the expected level of net worth given their age and income. In a typical year, on average, these millionaires purchased apparel from only 4.7 stores. Those stores which were mentioned by at least 20% of these millionaires include: Costco, Dillard's, “favorite independent store,” J.C. Penney, Kohl's, Macy's, Nordstrom [especially men's shoes], Target, and Wal-Mart.

What are the chances that Dave and Linda can adopt the retail patronage habits of the millionaire next door types profiled?

Changing mindsets and behavior can be harder than you might think. Old habits, and ways of thinking die hard.

So are you engaging in this type of behavior – buying things because of the messages they send – instead of buying things that you actually need? Are you a “bargain shopping commando”?

Today, anyone can invest in a variety of investment products for future savings and generate additional income for covering monthly expenses.

Long-term investments usually offer higher profits compared to quick sale options with tax advantages. Not all products are tax exempt and some of them have strict requirements and limitations on the amount invested. Before individuals consider investing in any investment option, they must educate themselves and rely on the expertise of a reputable financial planner or investment adviser. It will most likely ensure they’re building a diverse portfolio to minimize risks and receive the highest return as possible.

The main goal of investing is to earn money for future retirement, college education, to purchase a home, and/or to supplement monthly income.

Financial planners and investment advisers can help potential investors with the planning process and to build a strategic portfolio. They are knowledgeable of national and international markets and the different securities structured for establishing portfolios that produce positive returns. The most important reward of some options is its incentive of reducing tax liabilities.

Investment Options with Tax Advantages

Employer Retirement Plans include 401K and 403B which are long-term investment options. The way it works is an employer automatically deducts contributions from an employee’s paycheck during every pay period. The employer will match the amount of money to a specified maximum.

Health Savings Account or HSA is an investment that offers deferred taxes and free taxes earnings on spending which must meet eligibility requirements. It offers benefits of tax relief and reducing medical costs and expenses.

Education Fund 529 is an option for planning for future college and higher education. Its benefits depend on the investor’s location and the usage of invested money and gains. The amount of investment is tax-deferred when accumulated.

United States Saving Bonds are government-issued and exempted from taxes by the state and local governments. Interest income is subject to federal taxes.

Traditional & Roth IRAs are securities offered to investors for future retirement planning. Both IRAs have a limitation on the amount of contributions allowed for investing. Upon retirement, retirees don’t have to pay taxes on income.

Municipal Bonds finance spending for counties, cities, and states in the United States. Many investment advisers consider the option safe. The disadvantage is they offer lower returns compared to other options.

ETF or Exchange Traded Fund has tax benefits and can be complex. Prospective investors should hire an investment adviser with tax knowledge. Taxes associated with the bonds can vary.

People who are considering investing in US securities must educate themselves by reading investment strategy books and tutorials for a better understanding of how stocks work. It’s your hard earned money that needs protecting to ensure legitimate trading and investing. Take the time to investigate the different securities offered in the market and search for an experienced financial planner or investment adviser.

There are plenty of resources available online with tools to help educate potential investors on tax-free and deferred tax retirement investments.

The United States Government has plenty of information available on its website using various tools to research professionals in the industry and investment options. Write down what you expect from your invested capital in terms of earnings. During your planning, consider the timeline when you anticipate selling or cashing in investments. If you’re investing long-term in certificates of deposits (CDs) and IRAs, there are restrictions on when you can cash in on the earnings.

Of all US securities, government protection is available for Treasury securities only. The government doesn’t protect against any losses on other investment options. The investor takes the loss and has to deal with the financial consequences. That’s why an investment professional is important in advising and explaining the risks involved with certain investment options on the market.

Before contacting an adviser, write all the questions you need to learn about the options, its advantages, and risks. It will give you a better understanding of the whole investment process.

One thing that I've noticed over the past few years is that it seems like there is an increase in the amount of people who refuse to take responsibility for their actions. Instead they blame others when things don't go the way they had hoped, and they subscribe to a “victim mentality”, a psychology that says there are outside forces beyond your control that are causing you to fail, and there's nothing you can do about it.

Victim Mentality: a tendency to blame external or uncontrollable factors, instead of focusing on internal or controllable factors for things that go wrong

I think if we're honest with ourselves, many of the problems we're facing today can be traced back to people who don't take responsibility for their actions, and instead act like things are just happening to them.

Much of the economic crisis we’re currently having can be placed squarely at the feet of people’s lack of responsibility. People are believing the lie that there is always someone else to blame (and someone else to depend on), and as a result when the time comes to make hard financial decisions, people are paralyzed. They feel powerless.

We live in a consuming society where if we want something – we buy it. Never mind the consequences. If we want a big new house that is over our budget? Never mind, we'll buy it anyway – after all the bank gave us a loan so we must be able to afford it! If we walk away and default, it will be their fault for giving me the loan in the first place! I run up my credit card bills? It's the credit card company's fault when I can't pay because they allowed me to have the card in the first place! I lost my job? It's not my fault for having poor job performance, it's the economy's fault! I can't win – I'm a victim!

Government Encouragement Of Irresponsibility

Let's be honest, the government hasn't exactly encouraged people to take responsibility and not play the victim. They've actually encouraged a victim mentality by giving failing banks huge bailouts, allowing them to dodge the responsibility for their poor business practices.

They've encouraged people to not find a job by continuously extending unemployment benefits for people who are out of work. They've dodged their own responsibility for many of the current fiscal crisis by shifting blame to Wall Street, big banks and mortgage companies.

They never once allowed us to believe that because of their encouragement of irresponsible lending (sub-prime lending anyone?), that much of this came about.

The point is, if you're looking to the government for some encouragement in wise spending, responsibility and moving towards a life of debt freedom, you're going to be sorely disappointed. They will encourage you to live with a victim mentality, and tell you that there isn't much you can do to succeed.

Decisions Have Consequences – Good And Bad

An article I read recently talks in depth about how the choices we make have consequences, and how so many of the great achievers in history have one thing in common – they took responsibility for their actions, whether the consequences were good or bad.

The price of greatness is responsibility

– Winston Churchill﻿

They didn't allow themselves to be defined by the actions of others, or by the actions of their government. Instead they took responsibility for their successes and failures, and because of it they were able to live great lives.

Put all excuses aside and remember this: YOU are capable.

– Zig Ziglar

Sometimes it is only us that are responsible for the tough situations we find ourselves in. It isn't the failure of our family, our friends or our government. It is the direct result of the choices that we make.

We ARE capable, and we need to stop making excuses.

Take Control Of Your Decisions, And Their Consequences

Are there situations where people legitimately are put in bad circumstances because of others – and are being victimized? Of course. But even in those situations you have a choice that you can make – to turn a bad situation into something good, or to allow yourself to become a victim, and to allow others to define you.

I read this on another site in regards to taking responsibility, and how we can choose to live a full life, one centered by responsibility, or we can allow ourselves to be victims:

What choices are you making in your life? Are they the ones that result in positive consequences?

We can choose if we’ll reflect our environment, or if we'll affect our environment.

We can choose to be happy, or not.

We can choose how we react to hard times in our life, with positivity or negativity.

We can choose to take responsibility for our actions, or blame others for our failures.

Have you allowed yourself to fall prey to a victim mentality? Has the relentless negativity in the news and in society caused you to start believing that you are a victim? What steps can we take to get ourselves out of the pit of victim-hood and despair, into the sunlight of responsibility and freedom? Tell me your thoughts in the comments!

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